by Jack Waymire
Based on a previous article we know they are not advisors who are employed by the Wall Street firms. The 5 Star rated advisors in the Paladin Registry have the following characteristics.
The 5 Star rating is not a credential, testimonial, or endorsement. It is awarded to advisors who scored 90 points or higher when Paladin Advisor Research reviewed their credentials, ethics, business practices, and services. Paladin’s policy is to only profile 5 Star rated advisors in the Registry for two reasons. Investors have told us they do not want to meet with lower rated financial advisors and the lower rated advisors do not want to explain lower scores to investors. We listened. We stopped profiling three and four star rated advisors in 2005.
The 5 Star score is based on 17 criteria in four categories of characteristics that impact advisor competence and trustworthiness: Credentials, ethics, business practices, and financial services.
Credentials are the advisors’ sources of knowledge that impact their levels of competence. First, there is years of experience. It takes years to become a financial expert. Second, are college degrees. Third are certifications and designations that are sources of specialized knowledge. CFA®, CFP®, CIMA®, and CPA/PFS® are best. And fourth are high quality associations that have continuing education requirements.
Ethics are the next most important characteristic. Investors have to be able to trust the advice they receive from financial professionals. One check is their compliance records at FINRA.org and SEC.gov. Second is their fiduciary status. Financial fiduciaries are held to the highest ethical standards in the financial services industry. And, third is their willingness to practice full transparency – that is they do not withhold any information that would impact the quality of investor decisions when they select and retain financial planners and financial advisors.
The third category of information is the advisors’ business practices. Number one is how they are compensated and their willingness to disclose this information to investors. Reporting is the next most important category and quarterly investment performance reports are at the top of this list. And third, is advisor communications and accessibility.
The last category is the five financial services that comprise wealth management: Planning, Investment, Insurance, Tax, and Legal. A sole practitioner, a firm of professionals, or a team of professionals who work together to deliver integrated solutions to their clients may deliver various combinations of these services.
Paladin Research gathers advisor data and uses a proprietary algorithm to measure the above characteristics. If the advisors score high enough they may be invited to be profiled in the Registry. There are no exceptions.
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